When to Use a Relational Contract

David Frydlinger (), Kate Vitasek (), Jim Bergman () and Tim Cummins ()
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David Frydlinger: Cirio Law Firm
Kate Vitasek: University of Tennessee at Knoxville
Jim Bergman: Commercial Officers Group, Inc
Tim Cummins: World Commerce & Contracting

Chapter Chapter 8 in Contracting in the New Economy, 2021, pp 107-122 from Springer

Abstract: Abstract In this chapter, When to Use a Relational Contract, a common question is “when should I use a relational contract instead of a transactional contract?” This chapter sets out to answer this question. Neither option is best in all scenarios, but some scenarios are more appropriate for relational contracts. This chapter examines how a global consumer packaged goods company considered dependency and risk when contracting with a supplier for third-party logistics (3PL) support. Two scenarios are reviewed—Scenario High and Scenario Low—which consider very different circumstances regarding dependency and risk and reaching the ultimate decision. While a countless number of scenarios can be analyzed (e.g., both risk and dependency are in the mid-range), these two scenarios showcase the logic of how one might select the most appropriate contracting model for a specific situation.

Date: 2021
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DOI: 10.1007/978-3-030-65099-5_8

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